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TMI Blog2017 (10) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law the learned Commissioner of Income-tax (Appeals) erred in confirming order made under section 143(3) of the Act by the learned Assessing Officer which is illegal, bad-in-law, ultra vires, without allowing reasonable opportunity of the hearing , without appreciating the facts, submission and evidences in their proper perspective, without providing copies of material used against the appellant and without allowing opportunity to cross examine and therefore, same is liable to be annulled. 3. The learned assessing officer erred in charging interest under section 234A, 234B, 234C and 234D of the Act. 4. The appellant crave leaves to add, alter and/or vary any of the grounds of appeal before or at any time of hearing." The revenue on the other hand had challenged the order of the CIT(A) on the following grounds: "1(a). On the facts and circumstances of the case, the ld. CIT(A) erre in directing that 6% of the bogus purchases be disallowed as the profits suppressed instead of disallowing bogus purchase u/s 69C of he Income tax Act, 1961. 1(b). On the facts and circumstances of the case, the ld. CIT(A) failed to appreciate that the findings of the search acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the investigation team of the department had also found the address of a secret premises at Thane which was operated by Sh. Uttam Hinger, the brother-in-law of Sh. Praveen Kumar Jain. The A.O further observed that the search team had also recovered certain unaccounted parallel books and a pen drive containing incriminating evidences of letters pertaining to the parties with whom Sh. Praveen Kumar Jain and others had secretly dealt with. The A.O in order to verify the genuineness and veracity of the purchases claimed by the assessee to have been made from the aforesaid concern, viz. M/s Olive Overseas Pvt. Ltd., therein issued a Notice u/s 133(6) to its director, which however could not be served. The A.O brought the said fact to the notice of the assessee and directed him to produce the director of the aforesaid concern, viz. M/s Olive Overseas Pvt. Ltd. The assessee however gave an evasive reply and did not produce the aforesaid person before the AO. That in the backdrop of the aforesaid factual position the A.O held a conviction that as the assessee had not made any genuine purchases from the aforesaid concern, therefore, the purchase consideration paid to the said hawala dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid concern, viz. M/s Olive Overseas Pvt. Ltd. However, the CIT(A) being of the view that the A.O had accepted the sales of the assessee and had failed to conclusively prove that the payments of the purchase consideration made by the assessee through banking channel to M/s Olive Overseas Pvt. Ltd. was received back by the assessee, therefore, concluded that the A.O could not have made an addition of the purchase consideration under Sec. 69C in the hands of the assessee. The CIT(A) being of the view that now when the A.O had accepted the sales of the assessee, therefore, as no sales would have been possible without purchase of goods, thus, it could safely be concluded that the assessee had purchased the goods, though not from the aforementioned hawala party, but from the open/grey market. The CIT(A) on the basis of his aforesaid conviction therein held that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit that would have been involved in purchasing of the goods from the open/grey market. The CIT(A) took support of the judgment of the Hon'ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013) 356 ITR 451 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had passed the order without appreciating the facts of the case in the right perspective, therefore, his order may be set aside and that of the A.O be restored. 7. We have heard the ld. D.R, perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the issue before us. We are unable to persuade ourselves to accept the claim of the assessee that the purchases made from M/s Olive Overseas Pvt. Ltd. were genuine. We find that Sh. Praveen Kumar Jain had in his statement recorded under oath during the course of search and seizure proceedings conducted on him, had clearly admitted that he and his group entities were only providing accommodation entries and not carrying out any genuine sales of diamonds. We are of the considered view that in the backdrop of the aforesaid statement of Sh. Praveen Kumar Jain, the A.O in order to verify the genuineness and veracity of purchases claimed by the assessee to have been made from M/s Olive Overseas Pvt. Ltd, a group entity of Sh. Praveen Kumar Jain, had issued Notice u/s 133(6) to the director of the said concern, which however could not be served. We find that the A.O brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction No. 2/2008 as a basis, had held that the addition in the hands of the assessee in respect of the bogus purchases was to be restricted to the extent of 6% of the purchases claimed by the assessee to have been made from the aforementioned party, viz. M/s Olive Overseas Pvt. Ltd. We do not find ourselves to be in agreement with the aforesaid view of the CIT(A). We are of the considered view that the additions in respect of the profit element involved in making of purchases of the goods by an assessee from the open/grey market has to be determined keeping in view the multiple factors, viz. VAT benefit, benefit of other taxes, discounts and other similar benefits. We are of the considered view that the CBDT instruction relied upon by the CIT(A) is in context of the profit element which an assessee would generate from sale of diamonds, which the Board after considering certain factors had reasonably accepted as 6% of the turnover. We are of the considered view that the issue before the CIT(A) was to fairly estimate the profit that the assessee would had made from making of purchases from the open/grey market, and on the said basis nullify inflation of the purchases made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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